Emergent shares fall 6% on 1st day

Biotech offerings get tepid reception

November 16, 2006|By Tricia Bishop | Tricia Bishop,Sun reporter

Shares of anthrax-vaccine maker Emergent BioSolutions fell 6 percent in their first day of trading yesterday, the latest in a series of tepid initial public offerings by biotechnology companies this year.

The Gaithersburg company, which trades under the symbol EBS on the New York Stock Exchange, is the sixth Maryland business to go public this year and one of two to make their debut yesterday. A partnership formed by Baltimore-based Constellation Energy Group to develop natural gas fields in Alabama traded for the first time on the NYSE Arca exchange, opening at $21.75 under the ticker symbol CEP and closing at $22.08.

Emergent opened at $12.50 and got a small boost about a half-hour later, but fell throughout the day to close at $11.70, down 80 cents.

The company makes the only Food and Drug Administration-approved anthrax vaccine, which the government uses to vaccinate troops. Executives had hoped the stock would initially sell for between $14 and $16 apiece to underwriters, but had to settle for $12.50 when it sold 5 million shares to underwriters Tuesday night, netting the company about $58 million after fees.

Just three of the 16 biotechnology businesses that have gone public nationwide this year have priced within their expected range, including Baltimore's Osiris Therapeutics Inc.

Yesterday's trading gave Emergent a market capitalization -- measured by multiplying stock price by the number of outstanding shares -- of about $321 million.

"Today marks a pretty significant milestone for the company, and we are thrilled that it has occurred and [for] the money that it has been able to raise," said Emergent spokesman Robert G. Burrows. "We look forward to continuing to expand our business and providing valuable vaccines and therapeutics for the biodefense and commercial sectors."

The IPO market for biotechs, which make up two-thirds of Maryland's 2006 newly public companies, has been somewhat lackluster over the past few years, analysts said. It can take millions of dollars and a dozen years to bring a product to market, and most companies in the industry have little, if any, revenue when they begin selling public shares.

But Emergent BioSolutions Inc., which has 450 employees and makes products that manipulate immune systems to treat or prevent disease, has been profitable for the past three years and had sales last year of $127.3 million.

The company has already locked in revenue for next year, as well, promising to deliver 5 million doses of its BioThrax vaccine -- worth $120 million -- to the U.S. Department of Health and Human Services next year.

Unlike Emergent, Constellation Energy Partners priced at the high end of its proposed range. It sold underwriters 4.5 million shares at $21 Tuesday night, raising about $88.5 million for the partnership after discounts. Constellation Energy Group will still own 59 percent of the partnership's common units.

The company is trading on the New York Stock Exchange's electronic "Arca" exchange, which a spokesman said allows smaller, high-growth companies to get their foot in the door at the NYSE.

"Energy has been an active sector in terms of the number of deals, though the performance has been curtailed a bit because of the downturn in energy prices of late," said Richard J. Peterson, an IPO analyst with Thomson Financial.

Constellation's spinoff follows at least a dozen other energy partnerships that have begun trading shares this year.

tricia.bishop@baltsun.com

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